THE BOURSE WHISPERER: Australian iron ore producer, BC Iron (ASX: BCI) has signed agreements with its joint venture partner, Fortescue Metals Group (ASX: FMG) and subsidiaries, to acquire an additional 25 per cent interest in the Nullagine iron ore Joint Venture (NJV), effective 1 January 2013.

As part of the transaction, BC Iron, its subsidiary BC Iron Nullagine and Fortescue have executed binding documentation to give effect to the following:

–    BC Iron will increase its participating interest in the NJV from 50 per cent to 75 per cent;

–    The capacity available to the NJV on Fortescue’s rail and port infrastructure shall be formally increased to 6 million tonnes per annum (Mtpa) for the life of the NJV;

–    BC Iron’s share of annual production will increase by 80 per cent from 2.5 Mtpa to 4.5 Mtpa;

–    BC Iron shall make a once-off prepayment of rail haulage and port charges for 3.5 million tonnes (wet) of its share of production from the NJV (Rail and Port Prepayment);

–    BC Iron’s obligation to deliver product into its existing offtake agreement will remain unchanged; and

–    Fortescue and BC Iron will continue to explore other opportunities in the East Pilbara Region.

“This transaction reinforces the strong on-going relationship we have with Fortescue and we look forward to broadening that relationship going forward,” BC Iron managing director Mike Young said in the company’s announcement to the Australian Securities Exchange.

“The transaction is in line with our stated priorities to increase our resource base and export tonnes, and is something we have been working on with Fortescue for some time.

“It represents a low risk opportunity for BC Iron to almost double its annual production by acquiring more of a quality asset that we already operate and know extremely well.”

The total consideration payable by BC Iron to Fortescue (including the Rail and Port Prepayment) has been agreed at $190 million, plus a price participation arrangement payable to Fortescue in certain iron price conditions.

The total consideration, plus associated transaction costs, will be funded using a combination of existing cash, a new US$130 million debt facility, and approximately $54 to $58 million in equity through an underwritten placement and Share Purchase Plan.

THE BOURSE WHISPERER: Eastern Iron Limited (ASX: EFE) has received the results from scoping studies recently completed  at the company’s 100 per cent-owned Nowa Nowa iron project in Eastern Victoria.

The company said the studies have indicated the potential for development of a mining operation based on a previously announced resource of high grade magnetite and hematite iron.

 

Source: Company announcement

 

The scoping study determined ore would be mined at an average of around one million tonnes per annum from an open pit at the Five Mile deposit by contract mining operator.

Run Of Mine ore would then be beneficiated at site by crushing to less than 1.6mm and wet low intensity magnetic separation (LIMS) to produce average annual production of 0.8Mtpa of “fines” product grading +61 per cent iron.

Iron ore product will be loaded into standard B-double road haulage trucks at the mine site and trucked to a port on the south side of Two Fold Bay south of Eden for loading onto bulk capable vessels for export.

“We are pleased with the encouraging outcome of the initial scoping study delivered on time and within budget, and in a short time frame since we acquired the Nowa Nowa iron project,” Eastern Iron managing director Greg De Ross said in the company’s announcement to the Australian Securities Exchange.

“The economics of the project are robust and we will be moving quickly to undertake a feasibility study with initial activity due to commence shortly.

“Significant exploration upside potential remains at the project and we will be continuing activity to build on the potential JORC resource base at the Five Mile deposit and other regional targets at the project area.

“The exceptionally low capital cost is achieved as a result of the excellent infrastructure available in the project area including sealed roads, power and an export port with an operating bulk loading facility at Eden.”

Eastern iron outlined its operation program for the next 12 months to include further resource drilling at Five Mile which will be designed to investigate extensions to the resource as well as recovering core samples for further metallurgical optimisation studies and testing for ore variability.

Following the completion of the metallurgical studies the company will undertake a feasibility study including final capital and operating cost estimates.

Over the coming months Eastern iron will also be seeking to formalise arrangements with the port operators at Eden.

The company said it aims to progress the feasibility study over the next 12 months along with commencement of community consultation and the permitting and approval process.

To that end, the company will shortly engage a suitably qualified group to undertake preliminary baseline studies as well as ecological studies and development of a cultural heritage plan.

THE BOURSE WHISPERER: Every now and then The Roadhouse obtains research notes from different research establishments. Here’s a couple that hit our inbox this week.

Sovereign Gold (ASX: SOC)

Sovereign Gold (ASX: SOC) is focused on exploration of the Rocky River-Uralla Goldfield, located in north eastern New South Wales near Armidale.

Historical workings in the area produced approx. 167,000 ounces of gold from high grade deep workings between 1856 and 1967.

Limited modern exploration has since been carried out to determine the source of the alluvial gold.

In 2003, the NSW Geological Survey conducted an airborne geophysical survey that revealed the gold workings in the Rocky River-Uralla Goldfield may potentially be derived from magmatic fluid and as such could represent a much larger Intrusion-Related Gold System (IRGS).

Martins Shaft, located within EL 6483, is the most advanced prospect but is just one of the numerous targets identified.

An initial drilling campaign carried out in 2011 intercepted broad widths of shallow gold mineralisation including 22 metres at 3.2 grams per tonne gold and 18 metres at 3.5 grams per tonne gold, highlighting the potential of the region.

In November 2012, Sovereign entered into a JV agreement with a Chinese state owned company Jiangsu Geology and Engineering Co. Ltd (SUGEC).

Under the terms agreed, SUGEC will contribute A$21 million of funding to earn a 30 per cent interest in 10 exploration licences surrounding (but excluding) EL 6483 whilst also providing significant technical capabilities.

In November 2012, SUGEC and Sovereign agreed to broaden the scope of the JV agreement to include a further 8 tenements (now totalling 10) and increase funding to a total of A$21 million to be spread across tenements owned by Sovereign Gold and Precious Metal Resources (ASX: PMR).

At the completion of the agreed expenditure, SUGEC will be entitled to a 30 per cent interest in each of the respective tenements.

Securing funds earmarked for ‘riskier’ exploration projects in the current economic climate can be challenging.

Breakaway is encouraged by the recently announced JV as it not only brings significant capital to fast track exploration; it also brings a technical team of up to 14 geologists, geochemists and geophysicists to work with the company.

The JV also removes the need for Sovereign to contribute any funds to exploration on the 10 designated EL’s over the next two years, thus defraying risk while retaining a majority interest in all the tenements.

Breakaway is further encouraged by SUGEC’s involvement (a geology and engineering company) as it validates the IRGS model in the region.

Numerous other high priority targets exist within the exploration portfolio. To get a better understanding of the geophysical features at play, Sovereign Gold has already completed a 5,008km Geophysical Survey covering a large part of the tenure.

This magnetic and radiometric data has provided a detailed structural image for identifying potential conduits for gold bearing fluids.

In particular, the company will be looking for signatures similar to those associated with Martins Shaft.

Sovereign Gold represents an opportunity for investors to partake in a fully funded gold exploration company with exposure to quality exploration targets which have the potential to host significant deposits (million ounce potential) with shallow, ‘ore grade’, intercepts already identified.

All of the tenements within the portfolio are well serviced by existing infrastructure, with sealed roads, rail, water, power, airport and labour all nearby.

The most advanced and attractive project is hosted within EL 6483 which is excluded from the JV, further enhancing the potential upside for Sovereign Gold shareholders.

Recommendation: Speculative BUY

 

 

Venturex Resources (ASX: VXR)

Venturex Resources (ASX: VXR) is aiming to commence producing copper and zinc, in concentrates, at its flagship Pilbara copper-zinc project (100 per cent VXR), located close to Port Hedland in Western Australia during the 2H of 2014.

VXR has established a substantial JORC‐compliant Resource base containing in excess of 550,000 tonnes of copper‐equivalent within a number of high‐grade Volcanogenic Massive Sulphide‐type (VMS) copper-zinc deposits.

Preliminary results from VXR’s Feasibility Study suggest a low (C1) cash cost of A$1.15 per pound copper‐equivalent.

While VXR already has a substantial Resource base, there is exploration potential within and external to the identified deposits, in particular at the 35 kilometres of prospective, near‐surface  mineralisation at the Whim Creek, Salt Creek and Liberty Indee Joint Venture (JV) areas.

VXR is currently developing a drilling program to test down‐plunge extensions of the Evelyn deposit at Liberty Indee, the Salt Creek deposit and the Balla Balla prospect.

VXR is also planning to drill test more regional targets within the broader Mons Cupri area.

The company recently finalised a strategic 15 per cent share placement with an ASX 300 gold producer that is operating in the Ashburton‐Pilbara region of WA, Northern Star Resources (ASX: NST).

Northern Star invested $6.5 million and underwrote VXR’s recent $4.5 million capital raising.

The companies have also entered into a Memorandum of Understanding (MoU) to explore potential options for the joint‐development of the Pilbara project, which could result in significant costs savings for VXR.

In addition to the Pilbara project, the company is exploring for large gold deposits in Brazil through its wholly‐owned subsidiary CMG Mineracao Ltda (CMGM).

Out of the recent capital raisings, VXR has allocated A$1 million to explore its Brazilian assets.

The most‐advanced project in Brazil is Serre Verde (100 per cent VXR), which is currently awaiting the grant of exploration licences.

Serre Verde hosts VXR’s highest priority exploration targets.

Recommendation: Strong Buy

Disclaimer: The above
is intended as a guide only. The Roadhouse accepts no responsibility for
investments made from this advice.

THE BOURSE WHISPERER: Thor Mining (ASX: THR) (AIM: THR) has made significant progress in its staged acquisition of the Spring Hill gold project south of Darwin in the Northern Territory.
 

Thor has received a signed instrument of transfer from Western Desert Resources (ASX: WDR), its co-venturer in the project, for the transfer of a further 26 per cent interest in the Spring Hill gold project to be lodged with the Northern Territory Department of Resources for approval.

 

Thor Mining project locations. Source: Company announcement

 

Thor is confident it will get the required nod of Ministerial approval to the transfer.

Once this has been achieved the company’s total interest in the Springhill gold project will increase to 51 per cent.

“We are delighted to have achieved this increase in equity ownership of the Spring Hill project,” Thor Mining executive chairman Mick Billing said in the company’s announcement to the Australian Securities Exchange.

“Our exploration to date has confirmed extensions to the mineralisation, and added to the value of the project, and we still `have more targets to test.

“In addition we will be investigating all options to realise value from the project at an early stage.”

Thor Mining indicated the terms of the staged acquisition have been varied to set the timing of the pricing of the securities that are to be issued to Western Desert Resources in consideration for the acquisition, in order to meet the date the companies have agreed upon.

As a result, 21.7 million Thor Chess Depositary Interests (CDIs) in total will be issued to Western Desert Resources upon receipt of ministerial approval to the transfer.

THE BOURSE WHISPERER: Goodrich Resources (ASX: GRX) has entered into a sales and purchase agreement with Gem Diamonds Limited (LSE: GEMD).

The deal will result in Goodrich acquiring 100 per cent of the shares of Gem Diamonds Australia Holdings, owner and operator of the Ellendale diamond mine.

The Ellendale Mining Lease (covering 123.9 square kilometres) is located approximately 120 kilometres east of Derby in the West Kimberly Region of Western Australia.

 

Project location. Source: Company announcement

 

“The Ellendale diamond project presents an excellent opportunity for Goodrich Resources and a significant value to our shareholders,” Goodrich Resources chairman Alex Alexander said in the company’s announcement to the Australian Securities Exchange.

“We intend to complement the existing mining operation with an aggressive exploration program on Ellendale’s highly-prospective ground, aimed to increase the reserves and the life of the mine.”

Goodrich described Ellendale as being renowned for fancy and vivid yellow diamonds, which are greatly sought after for their rarity.

Ellendale contributes an estimated 50 per cent of the world supply of these fancy yellow diamonds.

The operation extracts and processes ore from a single diamond-bearing lamproite pipe known as E9.

A second pipe, E4, together with its processing plant, is currently under care and maintenance.

The latest mineral resource statement for Ellendale, dated 1 January 2012, shows a total combined – Indicated and Inferred – resource of 91.3 million tonnes at an average grade of 4.35 carats per hundred tons.

In addition to E9 and E4, Goodrich indicated there to be a further 47 lamproite pipes known to exist within the Ellendale Mining Lease.

Approximately half of these pipes are thought to be diamond-bearing.

Gem Diamonds has conducted only limited sampling of these pipes, which Goodrich considers to indicate potential exists for the discovery of additional diamond resources.

The Ellendale Mine has approximately 18 months of mine life remaining based on the current mine plan and reserve estimate.

Ellendale’s historical operations have produced strong recorded profits for Kimberley Diamond Company, a subsidiary of Gem Diamonds Australia, with 14 per cent EBITDA in FY 2011.

Kimberley Diamond Company generated sales revenues of US$57.6 million from Ellendale’s diamond operation for the January to June 2012 period; recovering a total 78,881 carats overall.

Ellendale’s fancy yellow diamonds comprised 15 per cent of the total carats sold during the period, accounting for approximately 80 per cent of the company’s revenue.

These fancy, yellow diamonds are sold directly under an off-take agreement to Laurelton Diamonds Inc., the diamond sourcing and manufacturing subsidiary of the world’s premier jeweller, Tiffany & Co.